E-Commerce Summary

Perhaps the clearest indication of the growing importance of e-commerce in the global economy is the rapidity with which Internet use has grown and spread during the last decade. The boom in e-commerce also includes increased use of other media for trade, such as the telephone, television, fax, and electronic payment. Because e-commerce became such an integral part of the global economy, the WTO has begun to consider how it fits into the multilateral trade framework, and what rules or regulations should apply.[1]

At the Second Ministerial Conference in Geneva in 1998, WTO members wrote the Declaration on Global Electronic Commerce, which calls for the establishment of a work program "to examine all trade-related issues relating to global electronic commerce, taking into account the economic, financial, and development needs of developing countries..."[2]. Because e-commerce cuts across many other key WTO issues such as services, and intellectual property rights, the WTO
has appointed councils from each 'cross-cutting' issue to investigate the effect of e-commerce on global trade. These councils include the Council on Trade in Goods, the Council on Trade in Services, the Council on Trade-Related Intellectual Property, and the Committee on Trade and Development.

E-Commerce: a good, or a service?

At present, discussion continues to revolve around whether e-commerce should be considered as trade in goods or in services, or a combination of the two.[3] By defining it as trade in goods, the WTO applies the rules under the General Agreement on Tariffs and Trade, which automatically lowers all tariffs and barriers to trade to zero. If e-commerce is defined as trade in services, then the rules of the General Agreement on Trade in Services apply, and countries only have to lower tariffs when they elect to liberalize their e-commerce sector.[4]

Developing countries, particularly those without strong e-commerce sectors, are in favor of classifying e-commerce as trade in services. They argue that they need the flexibility of regulating e-commerce in order to nurture their own industries, and that liberalizing too soon would give an unfair advantage to the e-commerce industries in developed countries.[5] Developing countries such as India and China who have booming e-commerce sectors are in favor of liberalizing trade in e-commerce, but would prefer to do so under the GATS so that they can begin with industries that have a comparative advantage.

Developed countries, including the US and the EU, are pressing for liberalization of e-commerce trade as soon as possible, and thus prefer to negotiate e-commerce rules under the GATT. The US succeeded in getting other WTO members to agree to an informal moratorium on internet tariffs until they come to some kind of agreement on how to classify e-commerce.[6] However, the US's position has been complicated by ambivalent domestic opinions. For example, the US Congress passed a law forbidding online gambling across international borders, provoking Antigua to take on the US in a WTO suit for establishing a significant barrier to trade. Antigua argued that the US's law would strangle a promising new e-commerce industry. The WTO has yet to rule on the case.[7]

The Doha Round

E-commerce will not be a central issue in the Doha round since WTO members voted to give the working group more time to explore the effect of e-commerce in cross-cutting issues, to develop suggestions for classification, and to research applicable legal issues related to e-commerce.[8] However, since the Doha round
includes negotiations on intellectual property rights, services, and investment, commitments
made in this round will have a lasting effect on the course of e-commerce negotiations in the future.